Those permissions seem fine but the directory is probably owned by
someone other than the user the web server runs as. You will need to
make sure it is owned by the correct user. It shouldn't need to be
deactivated. The auto-update is part of the core of wordpress and not
part of the plugin itself. All it is doing is downloading the zip file
and uncompressing it over the existing plugin directory, you see the
error you are seeing when wordpress can't overwrite what is currently
there.